Sunday, February 20th, 2011

The Mobility Bank

Jim Russell pointed me at an interesting paper over at the Brookings Institution’s Hamilton Project. It is a proposal to create a “mobility bank” that would assist people in relocating to find greater economy opportunity in another part of the country.

I’ve previously written about this with some approval as a concept in the past. The idea is that a lot of people are effectively stuck in economically depressed communities because they are underwater on their house or simply can’t afford to move. They can then become a drain on their community for social services, along with depressing wages through boosting the labor force. But more importantly, the people who can’t find jobs or only find underemployment are robbed of the dignity of what they could otherwise achieve through their own work and efforts. If we could help them move to a location where the economy is better or better matches their skills, such as by getting them out of their mortgage, this could be a win-win-win.

It’s easy to understand why this would be a controversial policy to say the least. We don’t have a tradition of just writing off places, and those that stand to lose people under such a program would no doubt be offended that the feds or others were actually helping to rob them of what they see as their most precious resource: their people.

There’s a huge debate out there over helping people vs. helping places. From what I see, most commentators say that we should do both, but we should more emphasize people. But this is a difficult concept to operationalize in practice. This Brookings study by Jens Ludwig and Steven Raphael takes one crack at what favoring people might mean.

The idea is that people who are in communities in the top third in terms of unemployment would qualify for mobility loans from the federal government of up to $10,000. The amounts could be used for moving related expenses for moves over 50 miles, but also for things like traveling to cities to scout out opportunities and interview for jobs. These would be administered like student loans and run by the same agency. As with student loans, repayments would not start until the person who borrowed the money was gainfully employed. But to reduce the disincentive to work, repayment amounts would be capped at a maximum of 3% of the borrower’s income, and would fully be considered paid off after 120 payments, even if the full principal amount was not yet repaid. Yes, this means there could be a subsidy, but the authors consider that worth it.

Part of their rationale is mobility overall has been declining, as they show in the cart below:

Also, mobility has been lower for people with lower educational attainment, unsurprising given their generally lower earnings power to fund moves, interview in other cities, etc.

Some of these mobility declines likely resulted from non-economic factors. But no doubt today’s terrible economy and housing market have kept people from moving who might otherwise want to. By putting in place a program targeted at only struggling cities, this Mobility Bank plan would seek to bring the migration engine back to a more normal baseline, assisting people to better their lives and helping communities (even if some would no doubt not consider it such), while minimizing disincentives to work and required subsidies. I think this is an interesting proposal very much worth a look. While it might not be something everyone could personally endorse, it shows some serious thought into what a federal program for assisting people vs. places in economic recovery might look like apart from direct education/training or some such.

Topics: Demographic Analysis, Economic Development, Public Policy

23 Responses to “The Mobility Bank”

  1. Larry Williams says:

    It was/is the federal policies that created these problems to begin with by subsidizing community abandonment through its three plus decade Ponzi scheme. While helping people is a noble goal, I’d hate to see what would amount to more of the same further devastating, already devastated communities. People do want to live in these places, but you can’t deindustrialize this country and believe our economy can proposer by providing services to one another. We are in for a great awakening. Having people move elsewhere doesn’t solve the inherent problems that have not been (and probably won’t be) addressed.

  2. Larry, I agree with you to some extent, but historically America has always dealt with structural economic change through migration, even when the industrial era was riding high. And I think the notion of being a manufacturing power, which I support, is orthogonal to this issue.

  3. Alon Levy says:

    The historic way America dealt with this is exactly what created the new problems. Abandoning cities didn’t lead to a suburban nirvana; it simply exported poverty and disinvestment to suburbs far from the favored quarter. Slum demolition did nothing to help the people being demolished, and increasingly project demolition is simply exporting crime from the projects to the places the former project dwellers are settled in. Tearing apart communities is never a good solution. It works on a very small scale, if only the richest and most motivated people are allowed to leave, but fails on a large scale.

  4. Alon, the thing that bugs is me that the people who tell us how bad migration is domestically are often the same people who tell us how great international immigration is. I don’t see how we can have it both ways.

    Captive labor is labor that can and will be exploited. Unionization is one way to deal with this. Making sure people have options to move is another. I recognize the downsides of migration, but think we need to recognize the real benefits as well. And most of the destructive migration was migration that took place within a given labor market, whereas this is about cross labor market migration.

  5. Jarrett says:

    Are we sure that declining relocation rates are a bad thing? I’ve moved many times, and I don’t think it’s good for my soul or my relationships. If careers are demanding less of it, possibly due to the internet’s ability to let people work more effectively from wherever they are, is this a problem?

  6. Thad says:

    “Also, mobility has been lower for people with lower educational attainment”

    And how will being able to move from city to city change this? They will still only be able for low-wage jobs that don’t provide benefits like health care, they still won’t be upwardly mobile, and they will still need social services like Medicaid, food stamps, and such, just in another city or state with more or less benefits. This money isn’t sending them to college or helping them gain any skills. And what is the incentive to take out a $10,000 loan that you wouldn’t be eligible for or have the ability to pay back with your current potential earning power that you would still have upon moving somewhere else. Church’s Chicken or K Mart doesn’t pay a lot more in Austin than it does in Chicago.

    I feel that this policy ignores a lot of other factors that need to be addressed like the kind of unemployment and unemployed people and communities this would benefit before we start trying to sing its praises.

  7. Wad says:

    A mobility bank is forward-thinking, but I have some misgivings about how it would be prone to abuse — at a degree greater than welfare assistance.

    This program would likely create a class of vagabonds who can become the beneficiaries and game the assistance to their favor. A mobility bank, under the guise of work aid, could allow the beneficiary to gain marginal employment that would be easily lost and allow for the benefit to be tapped again.

    This would be a virtual petri dish for deadbeats, as they could saunter from town to town and run up debts, commit fraud and at worst, make babies and abandon them.

    On the other side of the coin, these mobility loans would be exploited by exploiters.

    If mobility aid were available right now, a tapeworm like Scott Walker would use mobility aid to troll for scabs to fill Wisconsin government jobs. Or, a benign form would be to replicate inner-city land-banking but with labor. Companies can just dam up job opportunities until there’s sufficient labor surplus to drive down wages overall.

  8. Greg says:

    Mobility is probably declining because the population is aging. Older people are much less likely to move than young people fresh out of school. It’s a non-issue and unworthy of spreading more government pork.

  9. Alon Levy says:

    Aaron, there are three huge differences between international and intranational migration. First, sheer numbers. St. Louis has lost more than half of its population in 50 years. The only country that underwent the same depopulation emigrating to the US is Ireland, which remained an impoverished basket case until the 1970s. Second, the central government can help ailing regions develop, or more commonly accelerate their decline; this ability also exists internationally, but not to the same extent. And third, there are no huge disparities of wealth as between the US and Mexico or the Dominican Republic, ensuring that people who migrate would see a large gain in living standards no matter what.

  10. Thad says:

    @Wad:Most full-time minimum wage jobs pay more than $10,000, so what would be the incentive in taking out a LOAN(which would have to be paid back)and moving all over the place (which would be detrimental in the long run especially when you have kids going in and out of school)to get something that isn’t sufficient to live off of? Contrary to the welfare queen myth, people on welfare did have jobs, they just used the welfare to supplement their income. If so many people were dependent on it, than the reform to TANF wouldn’t have been successful in cutting millions of people off the rolls.

  11. Andy says:

    I for one LOVE this idea. I think there are a lot of people here in SE Michigan who would gladly take advantage of this kind of assistance if it made it easier to find work in another region… indeed, there is plenty of evidence that the decline in home values has kept a lot of unemployed homeowners in metro Detroit, who would otherwise have been willing to relocate to find work. It’s strained our human service providers and prolonged their own unemployment, further hindering their own long-term re-employment prospects.

  12. Thor says:

    This seems like the right idea at the wrong time. Right now the economic problems are national. The housing boom pretty much has hit everywhere in the country. There isn’t one region of the country that is particularly hard hit while another part of the country is booming. This is different than say in the 1980’s when the price of oil was dropping hurting the oil patch states like Texas and Oklahoma while states like California and Mass were having tech booms. In that case providing government assistance to to the unskilled to move to places where the economy is booming probably was a good idea, getting from Oklahoma City to the Silicon Valley probably would have helped a lot of the structurally unemployed people to find employment. But right now, the places that are doing the best are small almost rural communities in places like North Dakota. I suspect that Bismark North Dakota doesn’t have the ability to absorb large numbers of structurally unemployed people needing to escape Las Vegas.

  13. Aaron Brown says:

    The chart you posted is pretty interesting – I never would have expected that kind of long, consistent decline in mobility during the 90’s and 2000’s. Is there any good explanation for that?

    I know the 90’s were a boom time, so people may have been satisfied in their jobs (and thus, in their location), but there are a few major recessions in that period. I’d also have thought that the housing boom would have led to an increase in mobility, as people moved to the Sunbelt or exurbs.

    Any idea how these numbers compare with more long-term historical mobility figures?

  14. DBR96A says:

    My inner insensitive prick says that it serves all the stupid $30K millionaires right for not doing their due diligence before signing on the dotted line for a house they couldn’t afford. Nobody held a gun to their heads and forced them to do so. People can complain all they want to about shady business practices and transactions, but the reality is, none of it would have happened if the $30K millionaire contingency didn’t enable it, so the blame ultimately lies at their feet.

    I think if a “mobility bank” is created, those who participate in it must maintain a perfect or near perfect credit rating for 15 consecutive years before they’re allowed to buy a house again, and then they must pay for at least 25 percent of the house up front. Their negligence is ultimately what destroyed the U.S. economy three years ago.

  15. Interesting idea. I have a question or two about the graph posted:

    How will the general demographic aging of our country affect these changes? I know that plenty of snowbirds and other elderly midwesterners might make that move to the sunbelt upon retirement, but I’m curious as to if the general declining of mobility might be due to the fact that a large percentage of Americans aren’t at a stage in their life in which moving every seven years sounds very appealing. Such mobility may be more ideal as young and middle aged professionals seek out their dream career, but once individuals settle into jobs that they intend to keep until they retire, I would imagine that their rates of picking-up-everything-and-moving decrease. This is entirely speculation, and I’m sure that smarter people who read this blog might have numbers/facts to prove me otherwise, but I’d imagine that even the restless moving-about of Generation Y/Boomerangers wouldn’t counteract the Boomers general desire for stability in their later years.

  16. @Aaron Brown

    I don’t know what’s driving it. Some populating aging is part of it I suspect like others opined. You might contact the study authors to see what they have to say on it.

  17. Chris Barnett says:

    Aaron Brown #1: The largest cohort of Boomers were those born roughly 1959-64; their “echo”, the Millenials, peaked in about 1985-86. In the 1990’s, the Boomers would have been in their 30’s, settling in and raising families; their kids would have been in grade school.

    I would submit that the 90’s had reduced migration mostly because middle and upper-middle-class Boomers decided to stay put during our children’s school years, unlike our parents. I suspect a good bit of this may be due to most such families having two working parents (unlike the previous generation where Dad was the sole breadwinner in the majority of households). It’s hard to find two better jobs at once.

  18. I’m surprised the fact that homeownership is heavily subsidized, while renting is not, hasn’t been (yet) mentioned in this thread. But its a lot easier to pack up and move if you can simply give 30 days notice and call United Van Lines.

    (The downside is it’s also far easier to find yourself without a place to live if you don’t own your home).

  19. Chris Barnett says:

    Scotty, I don’t know where you have rented, but I always had to sign 12-month leases.

    Also, Indiana subsidizes renters with a “renter’s deduction” on state income taxes. Since it uses Federal AGI as the starting point, Indiana’s income tax form does NOT subsidize homeowners above the Federal deduction for mortgage interest.

  20. Wad says:

    Pardon the snark.

    After re-reading this article, I just realized the U.S. already has a robust mobility bank: the military.

  21. Wad says:

    @Thad, the incentives described in the mobility bank policy would lend themselves to be perverted.

    For one thing, people with higher incomes and higher education would have the tools to better ride out economic storms and probably would avoid applying for “mobility welfare.” They wouldn’t need it. Allowing them to tap the mobility bank would serve as a political backstop; middle- and upper-class beneficiaries would better create a political constituency to defend the benefit.

    This is why Social Security is a mighty hill to climb in order to reform. It’s so broad it’s untouchable — through normal channels. Naomi Klein explains how it could be undone through economic subversion.

    That will leave the likely clients to be the underclass who won’t have the resources to lift themselves out of low-paying and marginal employment.

    There will also be a subset from this group who would take advantage of the mobility loans, and just go from one town to another while running up other debts (payday loans, car title loans, rent-to-own furniture, etc.) and doing this repeatedly from town to town.

  22. Thad says:

    @Wad: I can see your argument, and agree that the middle- and upper-classes would benefit the most from having a mobility bank, but based on the reading I had to do on welfare in a policy class I took and talking to the low-wage workers on my campus who are working for a living wage, I believe that an acute minority would abuse the bank to that extent. A good portion might take one loan, but in the long run, it is counter productive to continuously take out loans you can’t pay back that don’t give you any extra benefits. And if they are only doing low wage work that could be found anywhere, there isn’t much incentive to move around the country to get less than what they could potentially make even with a job at K-Mart. I would see more people take the loan out to get a car than to drift around the country ranking up more debt, unless they are a drug addict or have some kind of reason deficiency.

  23. ds says:

    I don’t see the point of this. Why don’t we instead pay rich people to move into more economically depressed areas?

    In real terms, abandoning communities is incredibly wasteful. That is the whole point behind the argument against sprawl. Building an entirely new infrastructure while letting an existing one rot is a waste of real resources. Yes it is true that sprawl and abandonment generate growth as measured by GDP flows, but that is not the point. GDP says nothing about how efficiently we are utilizing resources. The same level of growth in GDP generated by sprawl can easily be generated in the context of urban growth without mass abandonment. Indeed this must be the case or otherwise Europe and Japan would, over the past 50 years, have grown at a much much smaller rate than we did. But as we know, Europe and Japan grew at an equivalent (or better) rate in GDP terms, even though their resource endowments are smaller than ours.

    The bottom line is that the inter-urban mobility we see today — where entire regions grow in absolute terms at the expense of others — mirrors the sprawl we see within metropolitan regions. Government policies in the US have to a large degree promoted such wasteful and expensive abandonment and relocation. So why then should we support a new initiative which only serves to set further into motion the damaging forces created by government policies in the first place?

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